Thursday, September 27, 2007

frequent confused passengers

A few posts ago, I wrote about my disappointment in United frequent flyer program. Now I just read that American (actually the corporation owning American AMR) is being asked by a large shareholder to spin-off their frequent flyer program.

A quick side note before I explain more on that story. Remember back when all the airlines seemed to be racing into bankruptcy? Someone asked me if I thought their award miles would be dropped. I told them the last thing the airlines would drop would be their frequent flyer programs. They are too valuable to the airline. They would drop flights before dumping the award program. Not only does it help keep the business travelers, they make money on them. Can you say "profit center". So it comes as no surprise that these award programs are rewarding the airlines.

What is surprising to me is the huge amount of money this award program (now who is the "award" for - passenger or airline?) are estimated to be worth. Take a guess.

Billions - According to this report on AMR, they estimate this spin-off would be worth at least 4 billion dollars. I'm not sure but I suspect the biggest revenue comes from the deals with the banks and the associated credit cards. Is there any award program the doesn't push credit cards on you??

From reading the FlyerTalk messages on this, it appears this award program is the most profitable part of AMR. (again - the rewards go to who?)

Why can't the airlines just share the rewards a better?

Here's the article I read on Marketwatch.

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